Spending Vs Savings Vs Investing

The Secret of the Golden BucketsBy Mark Ford

Imagine a well with three golden buckets in front of it. One is labeled "spending"... the second is labeled "savings"... and the third is labeled "investing."

There's a sign on the well that challenges you to try your hand at a game. To win, you have to fill all three buckets to the brim.

It seems to be an easy challenge, but there are two problems:

The well will give you only so much water within a given time period.

If you look closely at the golden bucket marked "spending," you notice there is a sizable hole in it.

I'm using metaphors here, of course. The well represents your yearly income. The spending bucket, with the hole in it, represents the money you must spend to enjoy the quality of life you want. The savings bucket represents money you absolutely can't afford to lose. And the investing bucket represents your future wealth... what you will retire on.

If you manage to fill all three buckets, you win - you're rich!

You may be wondering what the difference is between saving and investing. To most people, they are the same. But I like to distinguish between them because it will help you acquire wealth safely.

Saving and investing are the same in the sense that you are setting aside some portion of your current earnings for the future. The difference is the purpose of saving is to safeguard that set-aside money, whereas the purpose of investing is togrow it.

The money in the savings bucket should comprise two things, really. The first is anything you are saving for that you will be paying for in less than seven years (more on that in a minute). Any type of big-ticket item.

Spending Vs Savings Vs Investing
Reviewed by S. Chitra
on
August 01, 2016
Rating: 5 The Secret of the Golden Buckets By Mark Ford Imagine a well with three golden buckets in front of it. One is labeled "spending&quo...